MD Milroy Gives Market Update
Highlights of interview....
- Capital raisings strengthens company
- Economics of Andash & Aktash
- Government elections
- The way forward
Record of interview:
companyinsight.net.au
There have been two major developments for Kentor Gold Ltd (ASX code: KGL) recently – the company’s capital raisings, and finally the formation of a coalition government in the Kyrgyz Republic after parliamentary elections there a couple of months ago. First, finance and the successful completion of a rights issue worth $52 million. Can you clarify the total money raised including the recent share placement? How much will be allocated to developing your flagship Andash gold-copper project in the Krygyz Republic and where will you allocate the rest?
Managing Director, Simon Milroy
The recent placement raised $13.4m and the rights issue raised a further $52.4m. Kentor now has approximately $74m in the bank. These funds, together with the US$50m debt facility are more than sufficient to complete the Andash project, embark on an extensive exploration drilling programme at Andash and the nearby Aktash deposit, and leave sufficient funds for additional acquisitions in the future.
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What was the overall support you received for the capital raisings?
Simon Milroy
The support for the placement was very strong. Institutions took part from Australia, Singapore, Hong Kong, Switzerland and London. Thirty new institutions joined the register and we also received strong support from all of our existing major shareholders.
The rights issue was also heavily supported with shareholders taking up approximately 90% of the rights issue and the balance taken up by investors who committed in advance.
companyinsight.net.au
Can you briefly remind us of the economics of the Andash project? What is the rough capital requirement?
Simon Milroy
The project capital cost is US$96m. US$50m is planned to come from the project debt facility and the balance from the recently raised equity.
Andash is exceptional. The bankable feasibility study earlier this year ranked it as one of the lowest cost gold mining projects in the world. The gold cash cost is estimated at US$29/oz after copper credits, including all production, treatment, transport and refining charges, as well as royalties.
This cash cost is calculated using an assumed copper price of $2.75/lb, at current copper prices, the copper credit increases and the forecast gold cash costs at Andash are even lower.
We are planning annual production to average 70,000 oz gold and 7,4000 tonnes copper for the first six years, and several nearby prospects provide the high potential to expand and extend the operational life considerably.
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What is the signifigance of the Aktash project over which you have announced an option to acquire 100%?
Simon Milroy
Aktash is very significant to the Andash project. Aktash lies just 8km away from the planned location of the Andash flotation plant. The ore at Aktash is significantly higher grade than at Andash. Our concept is to operate Aktash as a satellite mining operation and blend the Aktash ore with the ore from Andash. The higher grade ore from Aktash will increase the overall feed grade to the processing plant. This is likely to extend the mine life, reduce the cash costs even further and increase the annual gold production.
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You mandated Macquarie Bank to arrange the debt component for Andash. Has the bank completed its due diligence? In addition to the US$50m project debt facility, Macquarie Bank is also providing a US$6M facility to fund put options to hedge the copper price, have you decided to take advantage of the current strong copper price to do some hedging?
Simon Milroy
Macquarie Bank are currently working on the due diligence and we expect to have this completed by the end of January. Macquarie are already familiar with the project, and the country through the earlier due diligence that was conducted last year. We’ll constantly review whether to purchase put options. Macquarie’s decision to offer the facility rather than requiring price hedging as part of the debt package is a strongly positive indication of their confidence in the Andash project.
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The Kyrgyz parliament is reported to have approved a new coalition government last Friday. How significant is this for Kentor and the Andash project?
Simon Milroy
This is obviously a huge step forward for not only Kentor but also the whole country. The Kyrgyz Republic will have the only true democracy in the region and everybody is very optimistic for the future of the country. From the point of view of the Andash project it means that the pace of the permitting process will accelerate as we are confident the new government will be keen to announce the go ahead of a US$96m development and the associated benefits this will bring such as jobs, community development, taxes and royalties.
companyinsight.net.au
Can you update your wider exploration and acquisition activities in central Asia? Have you progressed the gold acquisition that you disclosed you were negotiating last month?
Simon Milroy
Kentor is constantly evaluating new project opportunities. We are located in a prolific mineral belt and our strategy is to acquire an additional project in the region. The development of Andash is obviously our first priority and we have a clearly focused development team who work exclusively on the Andash project. However, we are taking on some additional resources to work on finding Kentor the next project.
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With funding completed, what are your major tasks and timetable in moving towards production at Andash?
Simon Milroy
We are now awaiting final permitting from the local council. Full scale construction works are due to start in March next year in order to meet our target of commissioning the plant in March 2012.
As soon as we receive the local council permit, we plan to embark on an aggressive drilling programme at Andash Zone 1, Andash Zones 2 and 3 and the surrounding exploration prospects. Exploration drilling at Aktash will commence in the new year as soon as the weather permits which is likely to be in April. We plan to have a total of four diamond rigs working in the region and depending on the results, I would anticipate these rigs to continue working all of next year.
companyinsight.net.au
Thank you Simon.
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